BHP Billiton
is reviewing the number of contractors and staff across its mining mega-projects for potential cuts, the latest sign that it is unlikely to approve the expansion of its Olympic Dam copper-uranium mine in South Australia this year.

The engineering, procurement and construction management contractor for Olympic Dam, Jacobs Engineering, laid off several workers last week after its contract expired.

The company completed a final feasibility study on the $US20 billion-plus project in May and had been retained to help refine the study, and a submission to the BHP board outlining the economics and putting the case for approval.

Jacobs’ retention could no longer be justified pending a board decision after BHP chief executive
Marius Kloppers
recently indicated that the company’s three mining mega-projects may not receive board approval before December.

The other projects are construction of the $US20 billion outer harbour at Port Hedland to load iron ore onto ships, and a new $US10 billion potash mine in Canada. BHP is ­considering how best to stage its projects amid lower commodities prices and rising capital costs across the ­industry.

“There’s been a bubble of [resources] projects over the past couple of years, in excess of $250 billion worth committed, and they’re all drawing on the same contractors," Ernst & Young global mining leader Mike Elliott said.

“That has created delays and pushed up costs."

The BHP board has until December 15 to approve the Olympic Dam project or risk the South Australian government allowing an indenture agreement setting royalty rates for 45 years to lapse.

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South Australia’s Minister for Mineral Resources,
Tom Koutsantonis
, said last week that an extension would be granted only if the global economy took a turn for the worse.

BHP now lists only four permanent roles at Olympic Dam on its jobs website. They are all meant to support the existing underground mine rather than the open-cut expansion.

The company notes in the latest job ads that a proposal to expand the mine to an open-pit operation is “currently under study" but does not list a date for the board to consider approval.

In a job ad for the project in January, BHP said the Olympic Dam project was scheduled for board approval by the middle of the year – in line with the timing of the study work completed by Jacobs Engineering.

BHP spokesman Antonios Papaspiropoulos said the company would put the finishing touches to the Olympic Dam proposal itself now that its contract arrangements with Jacobs Engineering had been completed after 2½ years.

This does not preclude Jacobs Engineering being given a new contract to work on the project in the future.

Mr Kloppers indicated in May that BHP’s capital spending for this financial year relative to its cash flows was already largely committed, meaning it did not have much flexibility to spend on projects that were not already under development until July 2013 at the earliest.

As a result of lower commodity prices and dividend payment requirements, Deutsche Bank estimates the miner could be forced to fund $US5 billion of its planned spending this financial year with debt. BHP shares closed 81¢ lower at $30.55 yesterday, having fallen 8.6 per cent since the start of the year.

Mr Papaspiropoulos said BHP would approve new projects in a sequence that maximised value, reduced risk and balanced the consideration of short and long-term returns.

“As we plan the sequence of our projects, we will review both contractor and staff numbers across all operations which are likely to lead to some head-count reductions where appropriate," he said.